Canada's two largest railways are adding everything from new tracks
to modern locomotives as they hustle to keep pace with heavy demand
for freight hauling across the continent.

Canadian National Railway Co. [CNR-T]and Canadian Pacific Railway
Ltd. [CP-T]executives outlined their plans yesterday, saying they're
keen to take advantage of bustling consumer imports from Asia, the
commodity export bonanza and their competitive edge over trucks.

Customers are clamouring for more space to move their goods on the
rails, leaving the carriers scrambling to keep up.

"Right now we are not meeting our customer demands. The demand for
our transportation services is very strong," James Foote, CN's
executive vice-president of sales and marketing, said during an
investment webcast.

Canadian Pacific Railway

Canadian National Railway

One of CN's
efficiency projects focuses on lengthening
"sidings" — zones used to temporarily park
trains on tracks to the side of main lines,
allowing locomotives to move faster on the main
thoroughfare. Over the past five years, CN has
spent $300-million to extend sidings, and plans
to continue such improvements.

Montreal-based CN is also seeking approval from
the U.S. Surface Transportation Board for its
$300-million (U.S.) purchase of Elgin, Joliet
and Eastern Railway Co. (EJ&E).

CN chief executive officer Hunter Harrison wants
to invest a further $100-million to make EJ&E
more efficient, including rerouting tracks in
Chicago's core to the suburbs to avoid
congestion.

"Whether it's a box of cereal, a new vehicle or
a high-definition television, most products
travel a long way before we see them. By far the
most efficient way to haul freight overland is
rail," Mr. Harrison said in an open letter,
responding to complaints from suburban Chicago
residents worried about longer waits in their
cars at rail crossings.

"Railroads are more than three times as
fuel-efficient as trucks, conserving oil and
reducing greenhouse gases. With our highways in
gridlock, it's worth knowing that one typical
freight train carries the equivalent cargo
transported by 280 trucks," Mr. Harrison said.

CN's upgrades in Canada include the corridor
between the Port of Prince Rupert and the B.C.
Interior. It is also modernizing its Athabasca
Northern Railway unit in Alberta by spending
$135-million over the next three years.

CN, CPR and the four largest U.S. railways are
expanding because they need to handle
ever-increasing volumes of freight and reduce
bottlenecks along their systems, notably at
ports, transportation consultant Greg Gormick
said. "Demand is growing, and networks are being
stretched to the limit," he added.

While CPR has numerous projects on the go, the
biggest one on the drawing board by far is its
plan to expand into Wyoming in a quest to haul
coal, CPR chief financial officer Michael
Lambert said.

If approval is granted, CPR could invest up to
$6-billion, probably with partners, to tap into
Wyoming's Powder River Basin coal project. But
Mr. Lambert said a final decision has yet to be
made on the coal initiative.

CPR's expansion has included a $160-million
project in Western Canada to achieve "fluidity"
— industry lingo for smooth rail operations that
are mostly free of traffic jams. More
improvements are slated for the West.

Mr. Lambert said the railway is keen on
expanding its network around Refinery Row in the
Edmonton region.

Trains using the new tracks — pegged to cost
about $100-million, including other rail-related
infrastructure — will service existing
refineries and new petroleum processing plants
to be built over the next five years in what has
been dubbed Alberta's Industrial Heartland.